Georgia Lien Law Changes

Georgia Flag

Last year, the Georgia Court of Appeals issued a decision in a case called 182 Tenth, LLC v. Manhattan Construction Company, in which it narrowly defined the scope of costs that could be included in the amounts claimed in a lien.  For contractors, especially prime contractors and construction managers, it was a horrible decision because it effectively eliminated a substantial portion of the amounts that could be included in a lien against an owner.

More specifically, the Court held that various overhead and administrative costs contained in Manhattan’s pay applications, which were part of the contract price, were “unlienable” because they were not labor or materials that actually went into the property.  Those “unlienable” costs included:

  • staff
  • mobilization
  • power
  • safety
  • office supplies
  • small tools
  • temporary road
  • job site copier
  • progress photos
  • job site communications
  • job signage
  • dumpster rentals/pulls
  • unit certifications
  • general liability insurance
  • preconstruction
  • phone/water
  • job site trailer
  • job toilets
  • computers
  • fuel and oil
  • blueprints
  • record drawings
  • postage/courier
  • temporary fence
  • cleanup crew
  • final clean
  • builder’s risk insurance

This year, Georgia contractors lobbied the legislature to change the lien law in order to overcome the limitations imposed by the narrow interpretation of the Court in the Manhattan case.  HB 434 was passed on the last day of the legislative session.  A copy of the version that passed and is on its way to the Governor can be found here.

Georgia HB 434 modifies O.C.G.A. §44-14-361 to include the following language:

 (c) Each special lien specified in subsection (a) of this Code section shall include the amount due and owing the lien claimant under the terms of its express or implied contract, subcontract, or purchase order subject to subsection (e) of Code Section 44-14-361.1.

 (d) Each special lien specified in subsection (a) of this Code section shall include interest on the principal amount due in accordance with Code Section 7-4-2 or 7-4-16.

 Under the new law (after it is signed and goes into effect), contractors should be able to include in lien amounts the costs found “lienable” in the Manhattan case as long as those amounts are due under the terms of the contract.  But, I think the new language will not add clarity or guidance in a situation where the parties dispute whether an amount is “due and owing” under the terms of the contract.

In my next post, I’ll give at least two examples of how this new statutory language will lead to continued uncertainty and further litigation over what can be included in a lien.

North Carolina Lien Law Changes

North Carolina

North Carolina’s legislature made big changes to the state’s lien laws that went into effect this year.  One of the most critical changes—the “Mechanic’s Lien Agent” requirement—became effect on April 1, 2013.

The new law requires project owners or prime contractors to designate a Mechanic’s Lien Agent at the time of contracting and to post the information relating to the Lien Agent at the project site.  Any contractor or supplier that may potentially be a lien claimant must provide the Lien Agent with a preliminary notice of its involvement of the project within 15 days after first beginning work or supplying labor or materials.

To support these new requirements, North Carolina has created an online clearinghouse/filing system called the NC Online Lien Agent System at www.liensnc.com, which became active on April 1st.

My friend and fellow construction lawyer Bryan Scott, who practices with Spilman Thomas & Battle in Winston-Salem, North Carolina, has written two very detailed and practical articles about the new requirements of the North Carolina lien law [click here] and the new NC Online Lien Agent System at www.liensnc.com [click here].

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